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Investment Ratings Company Issues Grim Revised Predictions for CMBS Market

June 10, 2010

Over the past few months, our Riverside commercial real estate loan modification attorneys have written repeatedly about financial-industry predictions for the commercial real estate market. Almost none of those predictions have been good in 2010. In a June 10 article, Dow Jones Newswires notes yet another black outlook on the commercial real estate market, specifically in commercial mortgage-backed securities. The prediction comes from Moody's Investors Service, which has revised its original estimate that 8 to 9 percent of loans on CMBS will be delinquent by the end of the year. Following to a small jump in delinquencies in May, Moody's now predicts that 9 to 11 percent of CMBS will be delinquent by the end of 2010.

Last month's jump was from 7 percent delinquency to 7.5 percent delinquency. This may not seem like much, but it follows two months of modest declines, which gave some observers hope that the commercial real estate market was making a comeback. The article says Moody's revised its prediction to account for continuing high rates of unemployment, as well as the economic troubles in Europe that may have effects on the U.S. market. This is in addition to the existing troubles in the CRE market, which has been suffering for more than a year. Moody's Analyst Nick Levidy said some sectors of the CRE market are showing signs of improvement, while others bear the brunt of the downturn. The highest delinquency rates in May were in hotels and multifamily housing, both of which had default rates at 13 percent. But office properties saw the highest jump in delinquencies, from 4.6 percent to 5.6 percent. Regionally, the highest delinquency rates are here in the West.

As Costa Mesa commercial real estate loan modification lawyers, we're not surprised to see that the West is hurting. California, Arizona and Nevada could be considered the troubled residential mortgage capital of the U.S. (with Florida competing). Assuming that troubled residential mortgages spring from general economic troubles like unemployment, it makes sense that the commercial sectors in the same region would also be affected. In fact, the Dow Jones article notes that Nevada is the state with the most CMBS delinquencies, at 23 percent. That is, nearly a quarter of all commercial properties in Nevada are in foreclosure or heading that direction. In addition to harming the property buyer and the general economy, this can also hurt the stability of the lender, which of course is not getting paid back on its loan. If widespread enough, this could hurt the economic recovery for everyone.

At Howard Law PC, we represent CRE borrowers looking for an alternative to delinquency on their loans. With the economy staying down, it's difficult for borrowers to charge enough in rent to make their loan payments, and low housing prices can push properties underwater, making it impossible to refinance. We believe that it makes sense for lenders to pursue loan modifications rather than allowing properties to be foreclosed and absorbing millions in losses. Our San Diego County commercial real estate loan modification attorneys make this argument and others on behalf of our clients in negotiations with lenders. We prefer to come to an agreement outside of court -- but when necessary, we can and will enforce our clients' rights with a lawsuit. Our goal is to get our clients loan workouts that avoid a preventable default and put their businesses back on track.

If you're facing the possibility of a default on a commercial real estate investment and your lender isn't interested in negotiating, you should call Howard Law to talk about how we can help. To set up a free consultation, please contact us online or call 1-800-872-5925 today.